Pay for Success Watch: Will Congress Go from Toe-Dip to Plunge?

This Congress is certainly not going to be remembered for its ability to get things done. But when it comes to the issue of Pay for Success (PFS) and Social Impact Bonds, this summer has already produced a flurry of subtle actions, culminating with the prospect of major PFS legislation in the fall. A quick timeline of PFS movement on Capitol Hill in 2014:


Rep. John Delaney (D-MD) introduced an amendment to the Commerce-Justice-Science appropriations bill for fiscal 2015. It proposed increasing funding by $1 million for Pay For Success initiatives.

The amendment passed on May 29, by a vote of 321 to 87. The increased funding will be used specifically for programs targeting recidivism reduction.

Delaney has been a vocal supporter of the efficacy of Social Impact Bonds – both on the congressional floor in a quote below and in an op-ed he authored in The Hill, back in February.

“Pay For Success should be a no-brainer,” Delaney said. “As a government, we have to start using evidence-based solutions. Instead of simply throwing money at problems, we should measure outcomes and only fund what works.”

Legislative Rider

On July 22, a proposal from Sens. Rob Portman (R-Ohio) and Michael Bennet (D-Colo) to support high-performing job-training services was signed into law.

The Portman-Bennet provision was part of the reauthorization of the Workforce Investment Act (WIA), now called the Workforce Innovation and Opportunity Act (WIOA). WIA was originally passed in 1998 and has been up for reauthorization since 2003.

The provision included in the WIOA bill allows local workforce investment boards to redirect up to 10 percent of the dollars that flow through certain federal job-training programs to pay-for-success contracts.

Job-training service providers would become eligible to receive payments and bonuses, under this new model, if they achieve certain rigorous metrics – focusing on not just training but job placement.

The federal interest in innovation has the potential to save taxpayers money and ensure only effective programs are being funded. It also allows new and untested programs to enter the mix and avoid complacency.

Stand-alone Legislation

Bennet and Delaney are both involved in bipartisan bills aimed at adding “Social Impact Pay for Performance Contracts” to Title 20 of the Social Security Act. The House bill (H.R. 4885) was introduced in June by Delaney and Rep. Todd Young (R-Ind). The Senate bill (S. 2691) was introduced in late July by Bennet and Sen. Orrin Hatch (R-Utah).

Both bills would enable the Treasury Department to commit $300 million to pay-for-success projects over the course of 10 years.

We will update on this in the fall if movement seems real on the legislation, but for now, here’s basically how it works. State or local governments could apply for the federal pay-for-success funding, and Treasury would have six months to enter into a contract or pass.

The projects must be aimed at one or more of 14 specified outcomes. Many of them specifically pertain to youth-serving agencies and organizations:

  • Reducing incidences of child abuse and neglect
  • Reducing the number of youth who “age out” of the foster care system
  • Reducing the number of children in foster care who reside in group homes and other congregate care settings
  • Reducing recidivism among individuals released from prison
  • Increasing employment among 16- to 24-year-olds
  • Increasing the proportion of children living in two-parent families
  • Improving rates of high school graduation
  • Reducing teen and unplanned pregnancies
  • Improving birth outcomes among low-income families

Suffice to say, passage of this legislation would be the most significant development in the very short history of the American pay-for-success movement. So far, the feds have dipped a toe in the PFS water, with modest write-ins to broader legislation or to appropriations bills.

This concept would not amount to diving in head first. But if a $300 million experiment were to yield major gains in social outcomes, it could pave the way for PFS arrangements to eventually take a place among cooperative agreements and discretionary grants in the fabric of federal funding.

Pay for Success Watch is mostly written by Chronicle Editor-in-Chief John Kelly and Money & Business Editor Judith Fenlon.

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Judith Fenlon
About Judith Fenlon 166 Articles
Money & Business Editor for The Chronicle of Social Change